Next generation of clean energy technology is within Australia's grasp

By Kane Thornton

October 5, 2011 — 12.00am

CHRIS Berg from the Institute of Public Affairs wrote last week that the collapse of a US solar power company backed by the Obama administration should signal the end of the Australian government's support for clean energy (The Sunday Age, 25/9). This is a bit like saying back in 2001 that Ansett's collapse should stop anyone investing in an Australian airline.

There is no doubt the US government backed the wrong horse when it funded Solyndra, a major solar manufacturer that received more than $500 million in loans from the US government. But anyone who has been in the investment game for the long haul knows you don't always get it right. The world's third-richest person, Warren Buffett, has backed the wrong horse plenty of times. The trick is to spread the risk so that the wins eclipse the losses. Investors around the world are banking on clean energy being a big winner overall and bringing home the bacon.

The Clean Energy Finance Corporation (CEFC) pledged under the federal government's carbon price package will use $10 billion of carbon price revenue from big polluters as loans for new, clean energy technologies. It will be overseen by an independent board of finance professionals.

The CEFC is a sign the federal government understands what is needed by the clean energy industry. It is a once-in-a-generation opportunity to turbocharge the next generation of clean energy technologies and make better use of Australia's world-class sunshine, wind, waves and geothermal hot rocks. Clean energy is a race in which Australia is fortunate enough to have a winged keel, but we haven't done nearly enough to harness our abundant renewable energy resources. The CEFC will go a long way towards addressing a generation of underinvestment in this area.

Last year, renewable energy provided about 8.6 per cent of Australia's electricity. We are headed for 20 per cent by 2020 under the bipartisan Renewable Energy Target. A recent review by the Productivity Commission found that most of Australia's trading partners have introduced some kind of target for renewable energy. The debate on a carbon price continues, but the energy target is currently Australia's largest climate change policy, set to lead to the reduction of about 380 million tonnes of carbon emissions by the end of the decade. Like the IT industry in the late 1990s, some incredibly bright minds across the world have turned their attention to developing new technologies that can produce clean, renewable electricity.

Advertisement

Unlike IT, new, clean energy ventures need a substantial investment to take them from the laboratory to the point where they begin to generate power on a commercial scale.

All new technologies are risky for investors of both private and public capital, but the idea is to spread this risk across a portfolio of investments.

While you will lose your shirt on some, the ones that do succeed have the potential to pay off on a massive scale.

And globally there are plenty of examples where the investment is indeed paying off. Figures from Bloomberg New Energy Finance show that $US243 billion ($A252 billion) was invested in clean energy last year, as the sector continues to outstrip traditional energy. Some of the world's biggest players are seeing the value in clean energy investments, including Google, GE, the US military, Samsung and engineering giant Siemens. GE's Ecomagination program made more than $80 billion for the company over the past five years by combining good business and sustainability.

Clean energy is a massive opportunity for Australia. There will be the occasional setback, but this is an opportunity we should be seizing with both hands rather than looking for reasons to sit on them. Fortune favours the brave, after all.